Devex – Farmer-first supply chain connects seedlings to the supermarket shelf

Original article appeared on Devex:

In El Salvador, Acceso agribusiness wants to free farmers from the volatility of informal markets — and help local businesses stock stores with domestically grown produce along the way.

By Teresa Welsh // 01 April 2020

CHALATENANGO, El Salvador — Hugo Balthazar Hernández began farming when he was 18 years old.

He and his brother learned the trade from their father, and like many smallholders in El Salvador, they grew just a few crops on their small plots. Unpredictable pricing and flaky buyers at the local markets could see entire harvests go to waste.

“In the past, the informal market didn’t allow us to be sustainable,” Hernández said.

Hernández is now 24 and cultivating 15 different crops, the speed of business growth has been possible through his partnership with Acceso, an agribusiness that spun out of a Clinton Foundation initiative and is now funded by Canadian philanthropist Frank Giustra. It provides support to farmers from seedlings to the supermarket shelf.

“We come at the producer with first and foremost market access,”said Rob Johnson, COO at Acceso. “We basically say … ‘we have to orient your production around what the market wants.’ So the quality, the size, all of those kinds of things. We say, ‘this is the consistency, the frequency of production [needed].’”

Acceso’s services span the entire supply chain, rather than focusing solely on microcredit or technical assistance, so its agents are able to provide farmers a range of offerings — including inputs, credit, market linkages, and buying power.

“If we put all those things under one hood it adds to the value proposition we have to the farmer, and we can control what seeds go out, because that’s the demand that’s needed,” Johnson said. “But we can also have a better cost structure.”

Hernández has increased the land area he is farming in northern El Salvador as well as the number of crops he’s growing. Partnering with Acceso has also allowed him to employ 15 other people, and his goal is to continue to grow his business to be able to create more jobs.

“We have a more sustainable economy,” Hernández said. “Now we know every week we are going to harvest and we’re going to be receiving cash in exchange.”

A More Efficient Supply Chain

The ability to plant a wider variety of crops frees farmers from the cycle in which many smallholders in El Salvador become trapped: chasing the crop that everyone thinks will bring in the highest price. Andres Baiza, general manager of Acceso El Salvador, said that last year the price for tomatoes in March was very good. This year many farmers are growing tomatoes, hoping for a repeat of last year’s seasonal high prices.

“Then effectively they flood the market with tomatoes and it’s not timed in the correct way, so then it’s not really good for anybody because then there are these peaks and troughs in supply,” Johnson said. “The prices when all of their product hits goes way down because there’s a surplus of product in the market.”

Farmers are also spared the practice of experimenting with seed varieties and growing conditions — Acceso conducts such tests at its own facility. Smallholders working with the agribusiness receive seedlings that are optimized to succeed in their conditions.

Seedlings for a variety of crops grown at Acceso’s greenhouse facility are then distributed to farmers. The technicians give out seedlings on a schedule that allows them to control what’s going to come out of the fields at what time — requiring daily and weekly planning, Johnson said. This ensures supply is staggered and prices remain stable.

Smallholders like Hernández can benefit from the ability to receive inputs like seeds at lower prices — Acceso can negotiate with vendors since it is purchasing in larger volumes. Once produce is ready for harvest, farmers can repay Acceso what they owe for inputs like the seedlings with the product rather than cash, letting them grow their businesses without the need for a large amount of upfront capital.

Farmers working with the agribusiness can also expect to benefit from creative problem-solving. For some crops, too much rain during the rainy season is actually detrimental to the harvest. Baiza said that as much as 50% of a lettuce crop could be destroyed by too much precipitation, but Acceso found a way to shield lettuce from the rain using inexpensive tarp structures.

“Everybody thinks that when rain comes in, it’s easier to plant. For us, it’s the worst,” Baiza said. “We put these macro tunnels that act as an umbrella, so now the producers are producing 90 or 100% of the crop.”

The macro tunnel structures are cheap, easy to construct, and easy to move around. They can be put up when crops need a temporary shield from the rain and then moved to different parts of a field. This allows farmers to increase yields on the same amount of land because they are not losing crops, and it also provides a consistent supply to Acceso customers because half of the product is not being destroyed.

On the supermarket shelf

El Salvador’s largest supermarket chain, Super Selectos, which has been working with Acceso for six years, purchases produce as part of its initiative to stock its shelves with domestically grown products — a growing priority for businesses in the country.

Alberto Corpeño, director of categories at Super Selectos, said Acceso’s model of providing seedlings allows for optimum control over the quality of the 75 different kinds of produce the store buys, including tomatoes, lettuce, peppers, carrots, and celery.

“That was one of the biggest problems we had at the beginning,” Corpeño said. “It cost us a lot to get the quality that we offer to our customers.”

Acceso also sells tilapia to Super Selectos, and is in the process of scaling up a fishery that has a breed that can grow larger than the variety typically harvested in El Salvador. Farmers will receive the fingerlings that will allow them to earn more money from larger fillets.

The direct sourcing of both tilapia and produce from Acceso is an attractive business proposition for Super Selectos, Corpeño said.

“This allows us to keep our prices more competitive,” Corpeño said “We’ve gotten to a place where we’re getting more locally than we used to import. Now, 60% of what we buy, we buy right here in El Salvador. Eight years ago when we started, we could only buy 10%. There are some products we can buy 100% of domestically.”

Acceso farmers’ produce also ends up behind the counter at 83 Salvadoran Subway franchises, the majority of which are owned by Salvadoran businessman Sebastián Ortiz. He has been sourcing produce for his restaurants from Acceso for three years, gradually increasing his purchasing volume as he realized the company could consistently deliver quality products in the quantity — and with the traceability — he needed to supply all his sandwich stores.

Until now, the only vegetable Ortiz needed for his Subway stores that he couldn’t source from Acceso was lettuce. The company wasn’t able to offer washed and bagged lettuce, but the recent purchase of a machine housed in Acceso’s new collection facility will allow the agribusiness to bag lettuce in accordance with health and safety standards and process enough to meet demand. Ortiz said he hopes to no longer need to import lettuce.

“We’re going to start with a low volume and see what they can do, and try and work up from that,” Ortiz said. “You have to tie this in from the field all the way through to the restaurant.”

We’ve gotten to a place where we’re getting more locally than we used to import. Now, 60% of what we buy, we buy right here in El Salvador. Eight years ago when we started, we could only buy 10%. There are some products we can buy 100% of domestically.”
– Alberto Corpeño, director of categories at Super Selectos.